Why Norwegian Cruise Line Is Spending $400 Million to Update Old Ships

Andrew Sheivachman, Skift

- Jun 07, 2016 6:30 am

Skift Take

Norwegian Cruise Line is being strategic about deploying new ships to growing markets and bringing its aging fleet up to a better standard. But it still faces a challenge in communicating what exactly a Norwegian cruise experience is.

— Andrew Sheivachman

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After rolling out a new class of popular megaships a few years ago, Norwegian Cruise Line is now doling out a $400 million investment to update its older vessels in 2016.

Norwegian Cruise Line president Andy Stuart thinks that his company needs to do a better job ensuring a strong level of polish across its entire fleet, regardless of whether the ship is 20 years old or emerging from the shipyard.

The cruise line also launched a revised brand campaign earlier this year, with a particular eye on the growing Chinese and Australian cruise markets.

Norwegian is currently gearing up to operate the Norwegian Joy in China, which was developed and designed specifically to serve the Chinese vacationer.

Skift spoke to Stuart about bringing a cohesive brand identity to older ships, what it takes to design a vessel for specifically for China, and why introducing a cheaper fare options can make sense.

Skift: Norwegian recently changed its branding from Freestyle Cruising to Feel Free. What was the impetus behind changing that branding and what do you hope to accomplish from it?

Stuart: The challenge of freestyle cruising was that we always had to explain it. When we said, “We offer you freestyle cruising,” people would sort of look quizzically at you. If they cruised with you, they probably got it.

For some people, though, it was a swimming event at the Olympics. It had different meanings for different people and almost invariably [we eventually had to communicate exactly what it was]. That’s a challenge when you have a very short window to communicate to people.

We felt there was an opportunity to come up with something that told essence of the story in two words without having to move onto another explanation, and everybody felt “Feel Free” achieved that because it’s emotional. You say that, and we use it in everyday language. How often a day do you say, “Hey man, whatever you want. Feel Free.”

That was really the concept to try and simplify the communication to guests, to travel agents, to all of our constituents, saying, “Hey, listen. We stand for freedom and flexibility. We stand for a vacation on your own terms.” Let’s not have two steps to tell you that.

Skift: A $400 million investment in refreshing your existing ships has been underway since the beginning of the year. What’s the goal of the program, and what are the challenges of bringing fresh touches to old ships?

Stuart: Part of it is brand consistency. We want to tell a story about our brand that is singular but you can’t have all the bells and whistles on every ship.

You can’t have a huge slide on every ship like we do on Breakaway and Getaway, so there’s certain things that you can’t put on. But you can have everybody walk on every ship and feel like they’re walking on [a Norwegian] ship. The carpet should feel rich, every venue should feel like a new venue, and that’s our goal, so we’re taking every ship through a really in-depth dry-dock… this is not your typical let’s take the curtains down, dry clean them, and put them back on. This is down to steel, rebuilding spaces such that you do come out of dry-dock and people will walk on the ship and say, “Oh my God that’s a new ship.”

That’s the first piece of it and it’s critical. You can’t have people walk on one of your ships and there’s a little bit of rust over here and there’s a worn carpet here and then they go on Getaway and they get the experience that the brand new ship and it’s like, that’s not a brand. That’s two brands and we don’t want to be two brands, we want to be one brand.

Skift: Norwegian was in the news recently for introducing a bare-bones cruise fare dubbed as a Sailaway rate. At a time when cruising at large emphasizes inclusivity, and is pushing for higher fares, why go in the opposite direction? Is this a play to get more bookings from online booking sites like Expedia, maybe?

Stuart: In the last 18 months, we’ve worked really hard to get away from price and last year it was a knock it out of the park success. As we’ve come into this year, we’ve been successful but when you get into an environment where Europe’s a little tougher this year.

Because of everything that happened in Europe the U.S. traveler is a little bit less likely to go to Europe, a little bit more likely to cruise closer to home and when you get in those environments it’s difficult to completely avoid price. The promotion we have is a little tricky to explain online.

Really every part that communicates the promotional story online is somewhere different. Whether it’s the giant [online booking site] or the small travel agent, most people are presenting the promotion in an online environment and it’s complicated.

To say, “Okay, well if you’re in this category, you choose from these things. If you’re in this category, you get to pick two.”

In that environment we wanted at certain times to be able to show a price that you didn’t have to explain anything about. This is how much it is, and you get to go on a cruise.

Our view is that relatively few people ultimately will buy that one because once they, that brings them in, but once they then understand that’s on relatively few categories, small part of our inventory, they understand that you can get a beverage package that has a huge value. The price gap’s never going to be as wide as the value of the beverage package.

Some people will, who are very price conscious will be brought in and they’ll buy the “Sailaway” rate. Most people, this is the experience we have, they’re drawn in but then they said, “I want the beverage or the dining package, or the shore excursions or WiFi.”

Skift: You noted earlier that North American demand for European cruises is a little soft. How do you assess the strength of Norwegian at large in the global cruise market?

Stuart: We’re generally driving more Europeans and fewer U.S customers. The Americans, to some extent, they’re staying a little closer to home, so Alaska’s a strong market. Bermuda’s a strong market. Caribbean’s doing well. It tends to be a little cyclical. We have a couple of things that push a customer say one way or another.

We think Europe’s a very strong market in the medium term. We don’t see anything structural. There’s always something and the beauty of our industry is that we can navigate around that and we’re very flexible with how we deploy assets and so that’s one of the big advantages of the industry.

Skift: You’re gearing up to launch the Norwegian Joy in China next year. How do you assess the marketplace in China right now?

Stuart: The growth rate has been extraordinary. We continue to think there’s a lot of growth coming in that market. The ships, scale of the population, the fact that they have taken to cruising so quickly tells us that if we could just communicate to a small, new segment of that enormous population there’s a huge amount of demand so we’re taking our biggest, newest ship to China. The customization is going well. We spent a lot of time in China understanding what customers are looking for. What they really want versus what the western view of what they want is.

It is challenging and also I think the western view of what the Chinese customer wants can be fundamentally flawed, as I’m sure the Chinese view of what the western customer want would also be fundamentally flawed. We spend a lot of time understanding the consumer who’ buying a cruise today and what they’re looking for in the experience, what they love about the experience they’re experiencing today, what they would like to see and so we built customization based on that feedback.

It should be the first ship that’s really being custom designed for the market. We think we have a big leap up in the market. We’re late to the market versus others, but we think we’re going to bring the most appropriate experience to the market.

Skift: A few years ago, Norwegian took a risk with its luxury Haven ship-within-a-ship product. Has it been successful in attracting luxury cruisers to the brand?

Stuart: You know, we’ve been thrilled with the success of The Haven. When we started it we saw this gap where there are different kinds of luxury consumers. They’re older, very wealthy luxury consumers who maybe want a more sedate experience. They want a destination-rich experience, with lots of enrichment, and then there are younger couples and families who are affluent. They want the good things in life, but they want fun. They want nightclubs and they want bars and they want other young people. They want stuff for their kids to do, too, and it wasn’t really an experience we felt in the cruise industry that delivered 100 percent to that segment.

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